The account used to record the transfers of assets from a business to its stockholders is:
A)A revenue account
B)The retained earnings account
C)Common stock account
D)An expense account
E)A liability account

Question

Quizplus · Accepted Answer

The retained earnings account is used to record transfers of assets from a business to its stockholders. When a business distributes its profits to its stockholders, the retained earnings account is reduced and the dividends payable account is increased. This reflects the fact that the business no longer has the retained earnings that it previously held, and now must pay out dividends to its shareholders. Common stock and liability accounts are not used to record transfers of assets to stockholders, and revenue and expense accounts are used to record transactions that affect the income statement, not the balance sheet.

The Account Used to Record the Transfers of Assets from a Business